Edward Grant, director of Technical Connection at St. James’s Place, says protection can be used strategically with cashflow planning software and other wealth management technology to provide a holistic financial plan for the client.
He explains: “In client conversations, financial advisers now prioritise a comprehensive planning approach, wherein protection plays a crucial role in ensuring the ongoing suitability of financial strategies.
"By integrating protection into scenario planning, advisers enhance the resilience of financial plans, providing a sturdy foundation for meeting clients' goals and aspirations."
Trusting in protection
Another reason for bringing protection into the planning conversation is the need to use all the tax tools at a planner's disposal to help clients pass wealth down more efficiently.
Clients often ask how quickly the life insurance payout will be to beneficiaries, and whether this can be protected in terms of inheritance tax.
One tax-efficient way to help protect and preserve wealth for the next generation is to write life insurance policies into trust.
Grant says: "The concept of writing life insurance policies in trust is a nuanced area where the value of professional advice becomes evident.
"Many clients might not be aware of this option until it is recommended by their adviser."
By putting a life insurance policy into trust, this gives the trustees the authority to deal with your life insurance payout when you die.
Put simply, this acts as a will for the funds placed into the trust, making sure the funds go directly to the beneficiaries without the need for going through a probate for that part of a client's estate.
Generally, clients will need:
- A trust deed created as a legally binding document that outlines the parties to the deed, the trust terms and the beneficiaries' details
- An adviser to search the market to find the best possible insurance policy for the client
- A solicitor to create the legal document
- A trustee (someone over 18 and without a criminal record, who is likely to outlive the donor)
- When it comes to payout on the death of the donor (the policyholder), a death certificate will be required.
Streames says this is tax-efficient as a means of protecting wealth, but too often, even wealth managers have not realised this can be part of the overall planning mix, let alone the average client.
She says: "Talking to a client who knows about its existence as an option or what it does is very rare. Again with simplified use of language around this, it is very easy to explain and be understood; clients are usually happy to put into Trust once they understand."
She urges the profession to "take responsibility for this and make sure it is done for people", to help clients achieve better outcomes.
Streames adds: "Once you know what you are doing as an adviser and have a process in place, it is simple to implement for clients and yet it is the opposite for the client so I think we should be doing this wherever we can to achieve better outcomes."
